Quote from: ferbe on December 31, 2018, 05:52:43 PM

1. As I understand, i only need to claim capital gains once I transfer to my bank account. is that right? and would this be the same for bitcoin "income" in general?

capital gain/loss occurs when you sell for USD. it doesn't matter when you transfer to your bank account. you need to track your cost basis (the cost when you received/bought the property).

with bitcoin income (from goods and services), businesses are normally taxed on net income during the year. how you report depends how your business is organized. as a sole proprietorship, your net business income (bitcoin or not) would be taxed as ordinary income.

Quote from: ferbe on December 31, 2018, 05:52:43 PM

2. If I want to report bitcoin income on a tax return, do I simply add it to the "other income" how should I label it?

it depends what kind of income it is. if it's self-employment income, the gross taxable amount goes on schedule SE and the amount taxable as personal income goes under "other income".

self-employment can make things complicated as it is, before involving the capital gain/loss reporting from regular bitcoin sales. it might be simpler to organize your business as an LLC or corporation.

Quote from: ferbe on December 31, 2018, 05:52:43 PM

3. From your experience, will this trigger an audit to any greater degree?

4. If I do get audited, what must I show them? I only plan on maintaining a numerical client ID and amount paid in quickbooks. All other info like client name, email, IP...etc will get auto purged as part of my privacy policy.
The exchange would only show random deposits from various temporary electrum wallets. Would this routine be an issue if the IRS wanted to audit?

if you're just talking about selling goods then i think that's sufficient. as far as auditing goes, i have no idea.